December taper odds skyrocket after non-farm payrolls but the Fed still has a reason to wait

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If the Fed doesn’t taper in December it won’t be due to a weak jobs market. Over the last four months, the average job gain is 204K and that indicates a sustained level of solid job creation.

Non farm payrolls in 2013 Dec 6

Non farm payrolls

The best part of the report is falling unemployment on a rising participation rate. Had the participation rate simply held steady at 62.8%, unemployment would have fallen to 6.8%.

PIMCO’s Bill Gross is on Bloomberg radio saying the odds of a taper on December 18 are now 50/50 and other economists are saying the same.

For me, the jobs situation is strong enough to taper, or at least strong enough to signal a January taper. The reason not to taper is inflation. PCE inflation (which is the Fed’s preferred measure) fell to 0.7% y/y from 0.9% and core PCE slipped to 1.1% from 1.2% y/y.

Author: Adam Button

Adam Button is the managing editor of ForexLiveâ„¢. He was previously the chief currency strategist at XForex and has also worked with Intermarket Strategy. Adam believes there's an edge in knowing every tidbit of news. He was formerly the head of the markets team at the Canadian Economic Press and is a graduate of Ryerson University. Adam lives in Montreal, follow him on Twitter: @FX_Button.

27 Comments

  1. Why are stocks rising at the moment?
    they gained atleast 0.5% post nfp
    and not just us, dax,cac also…

  2. why would stock futures soar on this then?

  3. wow… if inflation is the reason are we going to see March or June? N i dont understand why E/U is so resilient… Adam ur take on this pls?

  4. Plooser: Time to ‘gracefully exit’ asset purchases

    Plosser: Would be wise to get rid of QE3

  5. With all the good explanations that you always give adam, i see no reason for current fx markets, gbp and euro holding up and stocks are rallying!!!
    any idea?

  6. To taper not to taper….the jpy is the answer. For me, as a trader.

  7. EUR/USD is sooooo resilient. Maybe the inflation data is the key, it means the Fed won’t taper and the economy is stronger.

  8. Adam, In addition to inflation, do you have any thoughts on whether the Fed might be wondering what the crazy Congress might do re the budget and default in February and therefore a possible delay until then to see which way the wind has blown?

  9. To taper or not to taper….the jpy is the answer, for me, as a trader. EUR/USD is a killer, these days…

  10. I think that’s what the market is saying. Strong economy but no taper???

  11. Adam
    Why is the market reacting in the opposite deriction. USD has suddenly become weaker as a reaaction to the data release

  12. Hi Adam
    all the moves have been reversed and back on Pre release level, except USDJPY, so i think always a best bet to trade NFP is USDJPY.

  13. Yeah, if this report is the critical one, it screams taper. Do you happen to have the average for the past 12 months or for 2013 so far?

  14. strong economy no taper?? yaiks… ok… Adam do u think U/J has found its top and shud we relly on technicals now rather than taper no taper I ‘m really tired of it…

  15. A strong economy is still good news for USD/JPY, it can rally on either. It’s the other crosses where the US dollar is in trouble. Then again, maybe the market is wrong and the Fed will taper.

  16. Incredible , noone can survive in this market ! I am quitting forex !!! not for me anymore guys !
    There must be a bunch of people working with bother to cut all the stop losses and then establish position ! This can be traded guys ……… makes no sense

  17. Sorry, I feel the need to add: However, on a daily basis, technical, EURUSD is bullish, no matter what… Just technical…Let s see what will happen at 1,3700 (FIBO 76.4).

  18. strange eur at 1.3668 lvl when it should be 1.3468 ???

    some mafiasos buying no mater what econ fundamentals are.

    the world is globalisically crazy,i cannot comprehend.

    it is all about who call the shots,not about who is right or what is right anymore.

    this is indeed one MAD MAD WORLD to live in!

  19. What I’m getting as a consensus is it was in-line with the whisper number and it would have had to be a large beat on expectations to signal a taper “especially as budget talk deadline loom and the fiscal uncertainty this creates as demonstrated by the government shutdown in October.” The market hasn’t forgotten Washington politics.

  20. I think the reason the euro is so resilient is that the current policy mix (fiscal + monetary) in the Eurozone is very restrictive, all the more so in comparison with other world regions… This has (almost) always been a recipe for currency appreciation.

  21. I doubr very much the Fed will taper in December, Just the way the U:S: Governement kicked the can to January on the debt ceiling, The Fed will kick the taper can until January. They will let the Holiday season go by, let consumers buy and buy with their credit cards and when they time comes to pay them in January or mid-January, they will drop the atom bomb. 2014 will be another story…. another year, another dollar….

    Regarding the euro, do you really think the euro should be a strong currency considering how fu**ed-up Europe is? no way Jose….

  22. NFP is over. But whatever the results were (it doesn’t matter to me) the Fed will not taper…

    From data point of view, Dec would be a better bet. From BB/Yellen point of view, would Ben initiate taper before passing the baton to Yellen? We’ll leave that to the market to speculate….but of course, BB holds the key!

  23. The Fed has been very vocal on tapering as a way to reduce the cost of keeping rates low, but has not given a schedule when it might happen. A strong NFP makes the case for tapering, but the actual date might be off into next year.

  24. Well if we see usd/jpy up and dollar weeken agains other pairs it can mean only one thing. Japs…

  25. Well, nice to see I’m not the only one frustrated by EURUSD strength, but still, I argued with the tape. I’d like to be right, but someone that bought Euros has my money at the end of the day.

  26. TA says the EUR hasn’t topped yet. The data says the opposite. When you have fundamentals at odds with technicals, follow the technicals.

  27. So a total of 203,000 jobs were created.divides that by 50 and that is 4060 jobs per state. .41 % of the jobs were government jobs .That leaves a total of 1624 private sector jobs per state. This is just government spin to keep the heat off Obama care.Many of the jobs were part time jobs for the Christmas season.Take the millions without a job it will take several years before we have real employment.

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